Contributed to the Globe and Mail by Benjie Thomas
The reaction from our federal and provincial governments on Saturday to hit back with corresponding tariffs and other actions is an unfortunate but needed response to what the U.S. imposed.
According to a recent KPMG survey, Canadian business leaders don’t want our governments to back down. Nine in 10 “wholeheartedly believe” that the federal and provincial governments "must stand firm in protecting Canada’s sovereignty and values."
But a world of tariffs is only going to hurt businesses and consumers on all sides of the border. We can hope that in time we can resolve this disagreement, and we return stability to our economy.
More importantly, this new trade war is a sobering wake-up call on the need for Canada to improve productivity, expand markets and re-establish the country as a place to invest in and grow companies – a sentiment that came through loud and clear in our discussions with Canadian business leaders.
To say that Canada is at an economic crossroads is an understatement. The reality is, we are stuck in the middle of the intersection, with economic and political traffic bearing down on us from all directions.
For too long, we’ve coasted along, carried by the size and strength of the U.S. market, growing increasingly dependent upon trade with this single partner, all the while ignoring the fundamental challenges facing our economy.
So, how do we deal with the serious challenges our economy faces?
We must act fast and decisively. Canadians across the country feel that we need to address these threats head-on, and we cannot lose that urgency. Our research has found that 80 per cent of Canadian businesses are preparing or bracing for a recession this year.
We need to act not only to withstand these tariffs but also to strengthen our economy—and bargaining position—for the long term.
We must take advantage of our advantages. These include vast natural resources in energy, food and critical minerals. Canada is the world’s 4th largest producer of crude oil and the 5th largest producer of natural gas. We also boast the world’s most educated workforce, as measured by the OECD.
We must expand our trade markets. For far too long we’ve had a near sole dependency on the U.S. for growth. Creating new markets takes time, and we know many efforts over the past decades have met with mixed success.
Right now, we sell our oil at a discount because we have access to only one market. But there is both a domestic and a global need for our energy resources. That requires large-scale infrastructure development, which has been met with environmental concerns. Canadian businesses have the know-how to develop these projects sustainably and safely.
Building pipelines east and west to both supply Canadians with domestic oil and sell our oil to expanded markets presents a unique opportunity for nation building. It is also an economic necessity.
But that concept of nation building has to go one step further by breaking down provincial barriers to trade. At a time when our export opportunities are at risk, it’s imperative that we remove all walls that block inter-provincial trade. Canada needs to be Canada’s most important trading partner.
We must also, at long last, address our productivity gap. On this we should be going all-in on artificial intelligence (AI). It’s been estimated that generative AI could boost our economy by more than $200 billion and save the average worker close to 200 hours a year—time that could be spent dreaming up the next game-changing innovation.
Finally, we must reverse the decline in our advantage on tax competitiveness. Last year, Canada was ranked 17th on the International Tax Competitiveness Index and the U.S. 18th. But that was a year-over-year drop for us of two spots and an increase for the U.S. of three. We maintain relative strength on cross-border tax rules, but on corporate taxes the U.S. ranks 20th while we rank 26th, and they are eating our lunch on individual taxes, ranking 17th to our 31st.
Ten years ago, the U.S. was considered to have the least competitive tax regime of any developed country. They’ve advanced, while we’ve been moving in reverse.
Hopefully we can negotiate a quick resolution on tariffs, but that won’t end our economic challenges.
Our economy has been slowing for far too long and we need to get it back on track. Canadian business leaders understand the issues and now is the time to act—to take back control of the wheel, address the problems under the hood and drive our economy forward.
Above all, this has reminded us: Canada is worth fighting for.
